Opinion
19-CV-07601 (ALC) (VF)
08-19-2022
SU PING YU, on her own behalf and on behalf of others similarly situated, Plaintiff, v. SHANGHAI DUMPLING INC., et al, Defendants.
TO THE HONORABLE ANDREW L. CARTER, JR., United States District Judge.
REPORT AND RECOMMENDATION
VALERIE FIGUEREDO, United States Magistrate Judge.
Plaintiff Su Ping Yu (a/k/a Amy Yu) commenced this age-discrimination action, on behalf of herself and others similarly situated, against six defendants: Shanghai Dumpling Inc. (“Shanghai Dumpling”); Shanghai Soup Dumpling Inc. (“Shanghai Soup Dumpling”); Shanghai Cafe Deluxe, Inc. (“Shanghai Cafe Deluxe”); Yili Weng; Ping Lin; and Xinsheng Gu (collectively, “Defendants”). Plaintiff, a former employee, claims she was fired based on her age and retaliated against for submitting an affidavit in support of her coworker's age-discrimination claim, in violation of the Age Discrimination in Employment Act (“ADEA”), 29 U.S.C. § 621 et seq., New York State Human Rights Law (“NYSHRL”) NY Exec. § 290 et seq., and New York City Human Rights Law (“NYCHRL”) NYC Admin. § 8-101 et seq.
Presently before the Court is Plaintiff's unopposed motion to strike Shanghai Dumpling's Answer and render a default judgment against it. ECF No. 124. For the reasons that follow, I recommend that Plaintiff's motion be DENIED without prejudice.
BACKGROUND
Plaintiff commenced this action on August 14, 2019. ECF No. 1 (“Compl.”). Defendants were served with the Complaint on December 17, 2019. ECF Nos. 16-21. On December 16, 2019, Michael K. Chong filed a notice of appearance on behalf of all Defendants. ECF No. 10. On January 7, 2020, Defendants filed an Answer to the Complaint. ECF No. 24.
This case is related to two other age-discrimination cases in this District (16-CV-4790 and 17-CV-2536), all against the same Defendants. See ECF Nos. 5, 37.
On January 28, 2020, Chong filed a motion to withdraw as counsel for Shanghai Dumpling and Shanghai Soup Dumpling, because he had not been retained to represent those two corporate defendants; he was representing only Shanghai Cafe Deluxe, Yili Weng, Ping Lin, and Xinsheng Gu. ECF No. 42. Chong explained that he had inadvertently filed his notice of appearance on behalf of Shanghai Dumpling and Shanghai Soup Dumpling. Id. Plaintiff objected to this request. ECF No. 43.
The next day, Chong moved to withdraw as counsel for all Defendants. ECF No. 44. In his affidavit, Chong explained that his primary contact, Yili Wang, for the four clients he intended to represent (Shanghai Cafe Deluxe, Yili Weng, Ping Lin, and Xinsheng Gu), had been unresponsive to email; had only partially answered questions; had not provided relevant documents and information requested by counsel; had not confirmed payment of counsel's retainer; and had communicated in a “hostile” manner with counsel. ECF No. 45 (Aff. ¶¶ 5-9, 11-14). The Honorable Debra C. Freeman held a conference on January 29, 2020. At that conference, Judge Freeman denied Chong's first request to withdraw as counsel for Shanghai Dumpling and Shanghai Soup Dumpling, as well as Chong's subsequent request to withdraw as counsel for the remaining four defendants, and instead ordered the parties to participate in a settlement conference on February 6, 2020. See ECF No. 49.
Following the settlement conference, Judge Freeman issued an order on February 10, 2020, detailing the status of the case and next steps. ECF No. 50. Judge Freeman relieved Chong from representing Shanghai Dumpling and Shanghai Soup Dumpling, concluding that these two defendants had never retained Chong or otherwise authorized him to appear in the action on their behalf. Id. Judge Freeman also struck the mistakenly filed Answer on behalf of Shanghai Dumpling and Shanghai Soup Dumpling. Id. Although Judge Freeman indicated that, with the mistakenly filed Answer stricken, Shanghai Dumpling and Shanghai Soup Dumpling would be in default, under the circumstances, Judge Freeman explained that she would afford Shanghai Dumpling and Shanghai Soup Dumpling a further opportunity to respond to the Complaint. Id. Accordingly, Judge Freeman gave Shanghai Dumpling and Shanghai Soup Dumpling until March 2, 2020, to “move, answer, or otherwise respond” to the Complaint. Id. In the order, Judge Freeman warned that Shanghai Dumpling's and Shanghai Soup Dumpling's “failure to do so may result in the entry of a default judgment against them.” Id.
As there is no transcript of the February 6, 2020 settlement conference, I rely on Judge Freeman's February 10, 2020 order (ECF No. 50) for a description of the events that occurred at that conference.
On March 2, 2020, new counsel for Shanghai Dumpling, Kevin Kerveng Tung and Bo Chen, filed notices of appearance. ECF Nos. 58-59. No new counsel appeared for Shanghai Soup Dumpling. Also on March 2, 2020, Tung filed an Answer on behalf of only Shanghai Dumpling. ECF No. 57. Jointly with Shanghai Dumpling, Plaintiff filed a status update on April 17, 2020. ECF No. 77. However, in a subsequent status update on August 14, 2020, filed by Plaintiff only, counsel for Plaintiff noted that he had “attempted to meet and confer with counsel for [Shanghai Dumpling] over 3 emails and 3 telephone calls” but counsel was never available. ECF No. 83.
On September 18, 2020, the Clerk of Court filed a certificate of default as to Shanghai Cafe Deluxe, Shanghai Soup Dumpling, Yili Wang, Ping Lin, and Xinsheng Gu. ECF Nos. 98102. That same day, Plaintiff moved for default judgment as to those five defendants. ECF No. 103. The case then lay dormant until July 7, 2021, when Judge Freeman held a telephonic conference. See 7/7/21 Minute Entry. Counsel for Shanghai Dumpling did not appear at that conference. See 7/7/21 Conference Transcript, filed on Docket No. 16-CV-4790, ECF No. 153 (“Tr.”). During the conference, counsel for Plaintiff explained that in a related case where the same counsel (Tung) also represented Shanghai Dumpling, Tung had indicated that he had lost contact with his client. Tr. at 8. At the conclusion of the conference, Judge Freeman denied without prejudice Plaintiff's motion, from September 18, 2020, for default judgment as to Shanghai Cafe Deluxe, Shanghai Soup Dumpling, Yili Wang, Ping Lin, and Xinsheng Gu. ECF No. 115; see also Tr. at 15-20.
On August 11, 2021, Plaintiff filed a letter with the Court, which, in part, described a conference that had been held before Judge Freeman on July 22, 2021. ECF No. 117. According to Plaintiff, during the July 22 conference, Tung, counsel for Shanghai Dumpling, told Judge Freeman that he was unable to reach his client. Id. Judge Freeman explained to Tung that if he wished to withdraw as counsel, he should file a motion to do so. Id. In the August 11 letter, Plaintiff also indicated that if Tung withdrew as counsel, Plaintiff would move to strike Shanghai Dumpling's Answer and for an entry of default judgment. Id. Plaintiff also noted that she intended to file another motion for default judgment against the other five defendants (Shanghai Cafe Deluxe, Shanghai Soup Dumpling, Yili Wang, Ping Lin, and Xinsheng Gu). Id.
No transcript of the July 22, 2021 conference was filed on the docket.
Plaintiff has not yet renewed her motion for default judgment against these other five defendants.
On August 25, 2021, Tung filed a letter stating his intent to withdraw as counsel for Shanghai Dumpling, because he had not been able to locate his clients for a “long time.” ECF No. 119. The next day, the Honorable Andrew L. Carter, Jr. issued an order instructing Tung to file a motion to withdraw as attorney for Shanghai Dumpling by September 9, 2021. Judge Carter also instructed Plaintiff to file a motion by September 30, 2021, to strike Shanghai Dumpling's Answer and enter a default judgment. ECF No. 120. On September 30, 2021, Plaintiff filed the instant motion to strike Shanghai Dumpling's Answer and render a default judgment against it. ECF No. 124.
On November 15, 2021, Tung filed a motion to withdraw as attorney for Shanghai Dumpling. ECF No. 128. In his supporting affidavit, Tung noted that “to the best of [his] knowledge,” Shanghai Dumpling had “ceased operation of the business,” and that “[i]n the past 12 months,” he had been unable to “locate any personnel” from the business. ECF No. 129 (Aff. ¶ 3). Tung informed the Court that he was sending “a notice and copy of” the motion to withdraw as counsel via U.S. mail to the last known address that Tung had for Shanghai Dumpling. Id. ¶ 5. Chen, who had also filed a notice of appearance for Shanghai Dumpling and appeared to work at Tung's law firm, never filed a motion to withdraw as counsel and is still listed on the docket as an attorney of record for Shanghai Dumping.
The Court granted Tung's motion for leave to withdraw as counsel on June 15, 2022. ECF No. 130. Since then, there have been no other communications with the Court, by Shanghai Dumpling or Chen.
LEGAL STANDARD
Federal Rule of Civil Procedure 55 governs the procedure for the entry of a default judgment. “Rule 55 provides a ‘two-step process' for the entry of judgment against a party who fails to defend: first, the entry of a default, and second, the entry of a default judgment.” City of New York v. Mickalis Pawn Shop, LLC, 645 F.3d 114, 128 (2d Cir. 2011). As to the first step, “[w]hen a party against whom a judgment for affirmative relief is sought has failed to plead or otherwise defend, and that failure is shown by affidavit or otherwise, the clerk must enter the party's default.” Fed.R.Civ.P. 55(a). However, in certain circumstances, a default may be entered by the court. Mickalis Pawn Shop, 645 F.3d at 128 (“Although Rule 55(a) contemplates that entry of default is a ministerial step to be performed by the clerk of court, . . . a district judge also possesses the inherent power to enter a default.”) (citations omitted).
After an entry of default, a plaintiff may then move for a default judgment. Fed.R.Civ.P. 55(b)(2). “The Court may enter a default judgment when the disobedient party has failed to comply with a court order due to willfulness, bad faith, or any fault, including gross negligence.” Arch Ins. Co. v. Sky Materials Corp., No. 17-CV-2829 (CBA) (LB), 2021 WL 966110, at *3 (E.D.N.Y. Jan. 29, 2021), report and recommendation adopted, 2021 WL 964948 (E.D.N.Y. Mar. 15, 2021). Because there is a strong public policy favoring “resolving disputes on the merits,” Pecarsky v. Galaxiworld.com, Ltd., 249 F.3d 167, 172 (2d Cir. 2001), any doubt “as to whether a default should be granted” should be resolved in favor of the defaulting party, Enron Oil Corp. v. Diakuhara, 10 F.3d 90, 96 (2d Cir. 1993). “[A] sanction so drastic as . . . entering a default judgment is not ordinarily imposed unless the disobedience has been willful, or in bad faith, or otherwise culpable.” Hounddog Prods., L.L.C. v. Empire Film Grp., Inc., 767 F.Supp.2d 480, 486 (S.D.N.Y. 2011) (quoting Luft v. Crown Publishers, Inc., 906 F.2d 862, 865 (2d Cir. 1990). The decision as to whether to enter a default judgment is left to the “sound discretion of a district court.” Palmieri v. Town of Babylon, 277 Fed.Appx. 72, 74 (2d Cir. 2008).
Under Federal Rule of Civil Procedure 37, a party may be sanctioned for failing to obey a court order, including by “striking pleadings in whole or in part,” “dismissing the action or proceeding in whole or in part,” or “rendering a default judgment against the disobedient party.” Fed.R.Civ.P. 37(b)(2)(A)(iii), (v), (vi). Striking an answer is a “drastic remedy” that should be used only once the court has considered “lesser alternatives” and whether the party's conduct was due to “willfulness, bad faith, or any fault of the party sanctioned.” Lemus v. Pezzementi, No. 15-CV-5592 (NSR) (LMS), 2017 WL 9534744, at *3 (S.D.N.Y. Aug. 11, 2017), report and recommendation adopted, 2017 WL 4174809 (S.D.N.Y. Sept. 19, 2017) (quotation marks and citations omitted); see also Agiwal v. Mid Island Mortg. Corp., 555 F.3d 298, 302 (2d Cir. 2009). In assessing whether sanctions are appropriate, courts look to several factors, including: “(1) the willfulness of the non-compliant party or the reason for noncompliance; (2) the efficacy of lesser sanctions; (3) the duration of the period of noncompliance[;] and (4) whether the non-compliant party had been warned of the consequences of . . . noncompliance.” Agiwal, 555 F.3d at 302; see also Am. Cash Card Corp. v. AT&T Corp., 184 F.R.D. 521, 524 (S.D.N.Y. 1999), aff'd, 210 F.3d 354 (2d Cir. 2000). A district court has broad discretion to impose sanctions under Rule 37(b). Sanchez v. Jyp Foods Inc., No. 16-CV-4472 (JLC), 2018 WL 4502008, at *3 (S.D.N.Y. Sept. 20, 2018).
The failure of a defendant to meaningfully participate in the defense of the action is grounds for striking the answer and entering default against that defendant. See Bratta v. Tramp, No. 08-CV-4073 (JFB) (ETB), 2009 WL 10708936, at *2-3 (E.D.N.Y. Nov. 30, 2009) (striking answer and entering default against individual defendant who failed to defend); see also 2W Prod. Corp. v. Y & P Wholesale, Inc., No. 07-CV-0423 (ENV) (MDG), 2009 WL 29311, at *4-5 (E.D.N.Y. Jan. 5. 2009), report and recommendation adopted, 2009 WL 455292 (E.D.N.Y. Feb. 23, 2009) (recommending that answer be stricken where defendants “failed to participate in a meaningful fashion” and failed to comply with three court orders).
Moreover, the failure of a corporation to obtain counsel constitutes a failure to defend, because corporations cannot proceed pro se in federal court. See Lattanzio v. COMTA, 481 F.3d 137, 139 (2d Cir. 2007) (discussing the rationale for requiring corporations, as “artificial” entities, to appear through counsel). Where a corporate defendant was ordered to retain counsel and does not, the defendant's failure to comply with the court's order to retain counsel is an appropriate basis for striking that defendant's answer and entering default. See Arch Ins., 2021 WL 966110, at *4 (collecting cases where a defendant's answer was stricken for failure to comply with court orders to retain and appear through counsel).
DISCUSSION
Here, a consideration of the relevant factors counsel against imposing the severe sanctions of striking Shanghai Dumpling's Answer and rendering a default judgment at this stage.
First, Shanghai Dumpling is still represented by Chen. Chen filed notices of appearance on March 2 and March 15, 2020, and has not filed a motion to withdraw as counsel for Shanghai Dumpling. In Tung's motion to withdraw as attorney and supporting affidavit, he mentioned only himself, not his firm (or Chen). See ECF Nos. 128-129. In instances where an entire firm has moved to withdraw as counsel for a party, the motion makes clear that it is applicable to the firm's representation and not merely an individual attorney at the firm. See, e.g., Castaldo v. Acasti Pharma, Inc., No. 21-CV-6051 (KPF), 2022 WL 2223009, at *1 (S.D.N.Y. June 21, 2022) (discussing law firm's motion to withdraw). Similarly, where multiple attorneys from the same firm have moved to withdraw, the motion makes clear as to which attorneys are moving for relief. See, e.g., Nikonov v. Flirt NY, Inc., No. 19-CV-07128 (SDA), 2021 WL 4198231, at *1 (S.D.N.Y. Sept. 14, 2021) (discussing motion to withdraw by two lawyers from the same firm). Here, Tung's motion did not indicate that it was made on behalf of the entire firm or also on behalf of Chen. Although Chen has not filed any letters or documents with the Court, Chen is still listed as an attorney of record for Shanghai Dumpling and thus Shanghai Dumpling is not an unrepresented corporate party.
Second, Shanghai Dumpling has not been warned by the Court that failure to defend would result in striking its Answer and an entry of a default judgment. To be sure, Judge Freeman warned Shanghai Dumpling on February 10, 2020 that it needed to retain counsel or it would be in default. But at that time, Shanghai Dumpling complied, retained counsel, and filed an Answer. And since that warning, there have been no subsequent warnings by the Court expressly alerting Shanghai Dumpling to the risk that it could have its Answer stricken and face an entry of default judgment.
In cases where courts have recommended striking an answer and entering a default judgment, the defendant was given a clear warning prior to the imposition of those sanctions. See City Merch. Inc. v. Tian Tian Trading Inc., No. 19-CV-09649 (MKV), 2022 WL 827843, at *4-5 (S.D.N.Y. Feb. 28, 2022) (giving defendants a final warning that failure to show cause may result in Rule 37 sanctions, including striking defendants' answers and an entry of a default judgment). Cf, Palaghita v. Alkor Cap. Corp., No. 19-CV-1504 (ARR) (RER), 2021 WL 4464121, at *7 (E.D.N.Y. Aug. 20, 2021), report and recommendation adopted, 2021 WL 4463483 (E.D.N.Y. Sept. 29, 2021) (recommending severe sanctions where defendants were repeatedly warned); Ally Fin. Inc. v. Comfort Auto Grp. NY LLC, No. 20-CV-1281 (MKB), 2021 WL 7159899, at *5 (E.D.N.Y. Nov. 23, 2021), report and recommendation adopted, 2022 WL 73484 (E.D.N.Y. Jan. 6, 2022) (same); Yoon v. Jamaica French Cleaners, Inc., No. 12-CV-3845 (RLM), 2014 WL 4199723, at *3 (E.D.N.Y. Aug. 22, 2014) (same).
Although I am cognizant that Shanghai Dumpling does not appear to have taken any actions to defend this case, it does appear from the docket that Plaintiff has also allowed the case to lay dormant. Because Shanghai Dumpling has not been expressly warned by the Court that it was at risk of having its Answer stricken or defaulting, the lack of such warning weigh strongly in favor of affording Shanghai Dumpling one final opportunity to remedy its inaction.
CONCLUSION
For the foregoing reasons, I respectfully recommend that Plaintiff's motion be DENIED without prejudice.
I further recommend that Shanghai Dumpling be warned that its failure to show cause, within 30 days, as to why an order should not be issued pursuant to Rule 37 (namely, striking the Answer and entering a default judgment) will result in the entry of such an order.
PROCEDURE FOR FILING OBJECTIONS TO THIS REPORT AND RECOMMENDATION
Pursuant to 28 U.S.C. § 636(b)(1) and Rule 72(b) of the Federal Rules of Civil Procedure, the parties have fourteen (14) days (including weekends and holidays) from service of this Report and Recommendation to file any objections. See also Fed. R. Civ. P. 6(a), (b), (d). A party may respond to any objections within 14 days after being served. Any objections and responses shall be filed with the Clerk of the Court. Any request for an extension of time to file objections or responses must be directed to the Honorable Andrew L. Carter, Jr. If a party fails to file timely objections, that party will not be permitted to raise any objections to this Report and Recommendation on appeal. See Thomas v. Arn, 474 U.S. 140 (1985); Wagner & Wagner, LLP v. Atkinson, Haskins, Nellis, Brittingham, Gladd & Carwile, P.C., 596 F.3d 84, 92 (2d Cir. 2010).